EU turns down Ryanair again on Aer Lingus takeover

The European Commission on Wednesday barred a third attempt by low-cost airline pioneer Ryanair to take over its Irish rival Aer Lingus, citing concerns passengers would lose out badly.

Ryanair immediately said it would appeal, lambasting the decision as politically motivated and insisting its proposed remedies to competition problems were not given due weight.

The "merger would have harmed consumers by creating a monopoly or a dominant position on 46 routes ... this would have reduced choice and, most likely, would have led to price increases for consumers," the Commission said in a statement.

Ryanair's remedies "were simply inadequate to solve the very serious competition problems which this acquisition would have created," EU Competition Commissioner Joaquin Almunia said in the statement.

The Commission said Ryanair offered to divest Aer Lingus operations on 43 overlap routes to Flybe, the UK-based no-frills carrier. It would also cede slots at London airports to British Airways on three key routes -- to Dublin, Shannon and Cork, with other London-Ireland slots also on offer.

However, the Commission said a review showed that Flybe "was not a suitable purchaser capable of competing sufficiently with the Ryanair/Aer Lingus merged entity."

At the same time, it appeared British Airways would not impact competition enough and would have "little incentive to stay on the routes beyond a three year period."

Industry consolidation was welcome "so long as it is not at the expense of consumers," Almunia told a press conference, citing a series of recent Commission airline merger approvals.

Ryanair tried in 2007 to take control of Aer Lingus, in which the Irish government holds some 25 percent, but the Commission prohibited that deal on competition grounds.

The company tried again in 2009 but decided to withdraw when it became clear Brussels and Dublin remained opposed.

During the attempted takeovers, Ryanair built up a 30 percent stake in Aer Lingus and offered to buy out the Irish government which has consistently refused to sell.

Changes to the airline business since 2007 have only reinforced the two airlines' position in the Irish market, the Commission said, adding that the proposed deal would "have removed the currently vibrant competition between" them.

Ryanair said earlier this month that it expected to be turned down again by Brussels and reaffirmed Wednesday it plans to appeal the decision.

"Ryanair today confirmed that it will appeal the EU Commission's announced decision to prohibit its latest offer for Aer Lingus," it said in a statement, insisting that its remedies did address EU concerns.

"It is untenable for the Commission to argue on competition grounds why they have rejected what is an unprecedented and revolutionary remedies package," it said, noting the EU's recent approval for British Airways parent company IAG to takeover BMI.

"It is clear that Ryanair, as Europe’s only ultra-low cost airline, is being held to a different and considerably higher standard by the European Commission than any other EU flag carrier airline," it charged.

The rejection of the remedies package amounted to "pandering to the narrow (and misguided) political interests of the Irish government," it said.

A travel sector analyst in Ireland said he believed that Ryanair probably felt it stood a better chance going to court with its appeal but there was "absolutely" no support for the deal in the country.

"The politicians are against it. The consumers are against it. The workforce is against it. Business groups have voiced opinion against it. There really isn’t a level of support for it," the analyst said.

Irish Transport Minister Leo Varadkar said the Commission's decision supported "the government’s view that a merger would be bad for competition."

Aer Lingus, which has repeatedly snubbed Ryanair and argues that it is a strong standalone airline, welcomed the ruling and said it was the first time the EU had rejected a takeover deal twice.